GAO
April 2012
United States Government Accountability Office
Report to Congressional Committees
DEFENSE HEALTH
CARE
Applying Key
Management Practices
Should Help Achieve
Efficiencies within the
Military Health System
GAO-12-224
April 2012
DEFENSE HEALTH CARE
Highlights of GAO-12-224, a report to
congressional committees
Applying Key Management Practices Should Help
Achieve Efficiencies within the Military Health
System
Why GAO Did This Study
What GAO Found
DOD’s health care costs have risen
significantly, from $19 billion in fiscal
year 2001 to $48.7 billion in its fiscal
year 2013 budget request, and are
projected to increase to $92 billion by
2030.
The Department of Defense (DOD) has identified 11 initiatives aimed at slowing
its rising health care costs, but has not fully applied results-oriented management
practices in developing plans to implement and monitor its initiatives. Resultsoriented management practices include developing plans that identify goals,
activities, and performance measures; resources and investments; organization
roles, responsibilities, and coordination; and key external factors that could affect
goals, such as a decrease of funding to a program. At the conclusion of GAO’s
review, DOD had completed and approved a detailed implementation plan,
including a cost savings estimate, for just 1 of its 11 initiatives. Developing cost
savings estimates is critical to successful management of the initiatives for
achieving the 2010 Quadrennial Defense Review’s call for reduced growth in
medical costs. DOD also has not completed the implementation of an overall
process for monitoring progress across its portfolio of health care initiatives and
has not completed the process of identifying accountable officials and their roles
and responsibilities for all of its initiatives. Without comprehensive, resultsoriented plans, a monitoring process, and clear leadership accountability, DOD
may be hindered in its ability to achieve a more cost-efficient Military Health
System, address its medical readiness goals, improve its overall population
health, and improve its patients’ experience of care.
GAO reviewed DOD’s efforts to slow
its rising health care costs by changing
selected clinical, business, and
management practices. Specifically,
GAO determined the extent to which
DOD has (1) identified initiatives to
reduce health care costs and applied
results-oriented management practices
in developing plans for implementing
and monitoring them and
(2) implemented its seven medical
governance initiatives approved in
2006 and employed key management
practices. For this review, GAO
analyzed policies, memorandums,
directives, and cost documentation,
and interviewed officials from the
Office of the Secretary of Defense,
from the three services, and at each of
the sites where the governance
initiatives were under way.
What GAO Recommends
GAO recommends that DOD
(1) complete and fully implement
comprehensive results-oriented plans
for each of its medical initiatives;
(2) fully implement an overall
monitoring process across the portfolio
of initiatives and identify accountable
officials and their roles and
responsibilities; and (3) complete its
governance initiatives and employ key
management practices to show
financial and nonfinancial outcomes
and evaluate interim and long-term
progress. In written comments on a
draft of this report, DOD concurred with
each of these three recommendations.
Additionally, DOD has another set of initiatives, which were approved in 2006 to
change aspects of its medical governance structure. GAO found that DOD had
implemented some of the initiatives but had not consistently employed several
key management practices that would have helped it achieve its stated goals and
sustain its efforts. DOD approved the implementation of the seven governance
initiatives with the goal of achieving economies of scale and operational
efficiencies, sharing common support functions, and eliminating administrative
redundancies. Specifically, DOD expected the initiatives to save at least
$200 million annually once implemented; however, to date, only one initiative has
projected any estimated financial savings. DOD officials stated that the other
governance initiatives have resulted in efficiencies and have significant potential
for cost savings. Further, the governance initiatives that are further developed
were driven primarily by requirements of Base Realignment and Closure
Commission recommendations and their associated statutory deadlines for
completion. Additionally, GAO found that DOD had not consistently employed
several key management practices, which likely hindered the full implementation
of the initiatives. For example, the initiatives’ initial timeline was high-level and
generally not adhered to, a communication strategy was not prepared, an overall
implementation team was never established, and performance measures to
monitor the implementation process and achievement of the goals were not
established. With more emphasis on the key practices of a successful
transformation, DOD will be better positioned in the future to realize efficiencies
and achieve its goals as it continues to implement the initiatives.
View GAO-12-224. For more information,
contact Brenda S. Farrell at (202) 512-3604 or
farrellb@gao.gov.
United States Government Accountability Office
Contents
Letter
1
Background
DOD Has Identified Initiatives Aimed at Slowing Medical Cost
Growth but Has Not Fully Applied Results-Oriented
Management Practices
Some Governance Initiatives Have Been Implemented, but DOD
Has Not Fully Employed Key Management Practices
Conclusions
Recommendations for Executive Action
Agency Comments
4
11
19
29
30
30
Appendix I
Scope and Methodology
33
Appendix II
Comments from the Department of Defense
39
Appendix III
GAO Contact and Staff Acknowledgments
42
Tables
Table 1: The Seven Approved Military Health System Governance
Initiatives
Table 2: Progress Made in Developing a Dashboard and Detailed
Implementation Plan for Each of DOD’s Strategic
Initiatives as of January 13, 2012
Table 3: Extent to Which the Patient Centered Medical Home
Implementation Plan Addressed the Six Desired
Characteristics of Comprehensive, Results-Oriented
Management Plans
Table 4: Status of the Seven Approved Military Health System
Governance Initiatives
10
14
16
21
Figures
Figure 1: Actual and Projected Costs of DOD’s Plans for Its Military
Health System
Figure 2: Current Governance Structure of the MHS
Page i
5
7
GAO-12-224 Defense Health Care
Abbreviations
BRAC
DOD
FYDP
J/UMC
MHS
MRMC
VA
Base Realignment and Closure
Department of Defense
Future Years Defense Program
Joint/Unified Medical Command
Military Health System
Army Medical Research and Material Command
Department of Veterans Affairs
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Page ii
GAO-12-224 Defense Health Care
United States Government Accountability Office
Washington, DC 20548
April 12, 2012
Congressional Committees
Over the past decade, health care costs in the United States have grown
substantially, and the Department of Defense’s (DOD) medical costs for
its Military Health System (MHS) 1 have been no exception. DOD’s total
medical costs have more than doubled from $19 billion in fiscal year 2001
to its fiscal year 2013 budget request of $48.7 billion. 2 The Secretary of
Defense stated that the cost of the MHS continues to increase and there
is a need to explore all possibilities to control the costs of military health
care. DOD’s health care system serves about 9.6 million beneficiaries—
including active duty, reserve, and National Guard troops and their
dependents as well as military retirees and their dependents. According
to a 2011 Congressional Budget Office report, DOD’s health care costs
are projected to reach $59 billion by 2016 and nearly $92 billion by 2030. 3
Under the current structure, the responsibilities and authorities for the
management of DOD’s MHS are distributed among several organizations,
including the Assistant Secretary of Defense for Health Affairs, 4 who
serves as the principal advisor to the Secretary of Defense and the Under
Secretary of Defense for Personnel and Readiness. Health Affairs is
responsible for submitting the Unified Medical Budget 5 a single combined
1
The MHS refers to DOD’s health operations as a whole and consists of the Office of the
Assistant Secretary of Defense for Health Affairs; the medical departments of the Army,
Navy, Air Force, and Joint Chiefs of Staff; the Combatant Command surgeons; and the
TRICARE network of health care providers.
2
DOD’s fiscal year 2013 budget request of $48.7 billion for its Unified Medical budget
includes $32.5 billion for the Defense Health Program, $8.5 billion for military medical
personnel, $1.0 billion for military construction, and $6.7 billion set aside for the MedicareEligible Retiree Health Care Fund. The total excludes overseas contingency operations
funds and certain transfers.
3
Congressional Budget Office, Long-Term Implications of the 2012 Future Years Defense
Program, Pub. No. 4281 (June 2011).
4
For purposes of this report, the Office of the Assistant Secretary of Defense for Health
Affairs will be called Health Affairs.
5
One component of the Unified Medical Budget is the Defense Health Program, which is
a single appropriation account typically consisting of operation and maintenance;
research, development, test, and evaluation; and procurement funds for the MHS.
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GAO-12-224 Defense Health Care
medical budget for itself and the services’ health operations, and centrally
manages Defense Health Program funds for the military services through
the TRICARE Management Activity, 6 while each of the military services
manages its respective medical personnel and programs. In 2007, the
Defense Health Board stated in its report, Task Force on the Future of
Military Health Care, 7 that DOD’s MHS does not function as a fully
integrated health care system and this lack of integration diffuses
accountability for fiscal management, results in misalignment of
incentives, and limits the potential for continuous improvement in the
quality of care delivered to beneficiaries. Further, we previously identified
DOD’s health care system as an example of a key challenge facing the
U.S. government in the 21st century and an area in which DOD could
improve delivery of services by combining, realigning, or otherwise
changing selected support functions and could achieve economies of
scale. 8
Congressional leaders have also raised questions regarding rising military
health costs and DOD’s MHS governance structure. For example, the
House Committee on Armed Services’ Print accompanying the Ike
Skelton National Defense Authorization Act for Fiscal Year 2011 9 noted
that the department had not yet developed a comprehensive plan to
enhance quality, efficiencies, and savings in DOD’s MHS, and it
encouraged the Secretary of Defense to evaluate the potential
operational, organizational, and financial benefits of a unified medical
command. We previously identified in our March 2011 report 10
6
DOD provides health care and mental health care through its TRICARE program, its
regionally structured health care program. DOD’s TRICARE Management Activity, which
oversees the program, uses contractors to develop networks of civilian providers and to
perform other customer service functions, such as processing claims and assisting
beneficiaries with finding providers.
7
Defense Health Board, Task Force on the Future of Military Health Care (December
2007).
8
GAO, 21st Century Challenges: Reexamining the Base of the Federal Government,
GAO-05-325SP (Washington, D.C.: February 2005).
9
The Ike Skelton National Defense Authorization Act for Fiscal Year 2011 (Pub. L. No.
111-383 (2010)) was not accompanied by a conference report. In lieu of a formal
conference report and joint explanatory statement, House Armed Services Committee
Print No. 5 (December 2010) was provided to show congressional intent and maintain
legislative history.
10
GAO, Opportunities to Reduce Potential Duplication in Government Programs, Save
Tax Dollars, and Enhance Revenue, GAO-11-318SP (Washington, D.C.: Mar. 1, 2011).
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GAO-12-224 Defense Health Care
opportunities to reduce potential duplication in government programs by
realigning DOD’s military medical command structures and consolidating
common functions that could increase efficiencies and reduce costs. We
noted that DOD could potentially save from approximately $281 million to
$460 million annually depending upon the governance option chosen. We
also reported that DOD had actions under way for a concept approved in
November 2006 that directed seven incremental reorganizational
initiatives designed to minimize duplicative layers of command and
control, among other things. For this review, we evaluated Health Affairs’
cost saving efforts and the status of its seven governance initiatives.
Specifically, we determined the extent to which DOD has (1) identified
initiatives to reduce health care costs and applied results-oriented
management practices to develop plans for implementing and monitoring
them and (2) implemented its seven medical governance initiatives
approved in 2006 and employed key management practices.
To determine the extent to which DOD has identified initiatives to reduce
health care costs, we reviewed documentation and interviewed officials
from the Health Budgets and Financial Policy Office and from the Office
of Strategy Management, within Health Affairs, as well as officials in the
TRICARE Management Activity. Additionally, to determine the extent to
which DOD applied results-oriented management practices to develop
plans for implementing and monitoring its initiatives, we evaluated the one
implementation plan for reducing health care costs that had been
completed at the time of our review. The analyses included comparing the
implementation plan for the completed initiative with results-oriented
management practices on which we have previously reported 11 and
drawing conclusions from a consensus of the analyses. To determine the
extent to which DOD has implemented its seven medical governance
initiatives approved in 2006, we visited the locations where DOD’s MHS
governance initiatives were being implemented to collect relevant
documents, interview agency officials, and observe any physical changes
to the locations. We also reviewed cost estimates, budget documents,
business plans, and other instructions, policy statements, and documents
related to progress made. Additionally, we interviewed officials within the
Office of the Secretary of Defense and the military services concerning
the initiatives’ implementation status. Further, to determine the extent to
11
GAO, Combating Terrorism: Evaluation of Selected Characteristics in National
Strategies Related to Terrorism, GAO-04-408T (Washington, D.C.: Feb. 3, 2004).
Page 3
GAO-12-224 Defense Health Care
which DOD employed key management practices in implementing its
seven medical governance initiatives approved in 2006, we identified prior
reports that documented key management practices of successful
transformational efforts. 12 Using these practices as a guide, as well as
documentation and discussions with MHS officials, we assessed DOD’s
actions taken and processes employed while implementing its seven
governance initiatives. Throughout this report, we used financial data for
illustrative purposes to provide context on DOD’s efforts and to make
broad estimates about potential costs savings. We determined that these
data did not materially affect the nature of our findings and therefore did
not assess its reliability.
We conducted this performance audit from March 2011 through February
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives. For details on our scope
and methodology, see appendix I.
Background
Rising Health Care Costs
According to the Defense Health Board’s Task Force on the Future of
Military Health Care, 13 rising health care costs result from a multitude of
factors that are affecting not only DOD but also health care in general.
These factors include greater utilization of health care services,
increasingly expensive technology and pharmaceuticals, growing
numbers of users, and the aging of the retiree population. Additionally, in
2009, the Defense Business Board reported 14 that defense health care
costs are taking up more of the defense budget, and its health care
programs may eventually compete with other critical defense acquisition
and operational programs. Figure 1 illustrates the actual and projected
12
GAO, Results-Oriented Cultures: Implementation Steps to Assist Mergers and
Organizational Transformations, GAO-03-669 (Washington, D.C.: July 2, 2003).
13
Defense Health Board, Task Force on the Future of Military Health Care.
14
Defense Business Board, Focusing a Transition (January 2009).
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GAO-12-224 Defense Health Care
future cost growth for DOD’s MHS according to the Congressional Budget
Office.
Figure 1: Actual and Projected Costs of DOD’s Plans for Its Military Health System
Notes:
Definitions of cost categories: Military medical personnel includes funds for pay and benefits for
uniformed personnel assigned to work in the MHS. Direct care and other includes funds for the
operation of military medical facilities and other activities. It includes pay and benefits for civilian
personnel assigned to work in those facilities but excludes the pay and benefits of military personnel.
Purchased care and contracts covers medical care delivered to military beneficiaries by providers in
the private sector, both inside and outside the network. Pharmaceuticals covers purchases of
medicines dispensed at military medical facilities, at pharmacies inside and outside DOD’s network,
and through DOD’s mail-order pharmacy program. TRICARE for Life accrual payments covers funds
deducted from DOD’s appropriation and credited to the Medicare-Eligible Retiree Health Care Fund.
Outlays from that fund are used to reimburse military treatment facilities for care provided to military
retirees and their family members who are also eligible for Medicare and to cover most of the out-ofpocket costs those beneficiaries would otherwise incur when seeking care from private-sector
providers.
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GAO-12-224 Defense Health Care
Supplemental and emergency funding for overseas contingency operations, such as those in
Afghanistan and Iraq, is included for 2011 and earlier but not for later years. Before 2001,
pharmaceutical costs were not separately identifiable but were embedded in the costs of two
categories: purchased care and contracts and direct care and other. In 2001, and later years, most
pharmaceutical costs were separately identifiable, but some of those costs may be embedded in the
category TRICARE for Life accrual payments. The amounts shown for the Future Years Defense
Program (FYDP) and the extension of the FYDP are the totals for all categories. The FYDP period is
2012 to 2016, the years for which DOD’s plans are fully specified.
Each category shows the Congressional Budget Office projection of the base budget from 2012 to
2030. That projection incorporates costs that are consistent with DOD’s recent experience.
For the extension of the FYDP (2017 to 2030), the Congressional Budget Office projects the costs of
DOD’s plans using the department’s estimates of costs to the extent they are available and costs that
are consistent with the broader U.S. economy if such estimates are not available.
Research, development, test, and evaluation; procurement; and military construction funds are not
included in this illustration.
Current Structure of DOD’s
Military Health System
DOD operates a large, complex health system that provides health care
to 9.6 million beneficiaries. DOD employs almost 140,000 military, civilian,
and contract personnel who work in medical facilities throughout the
world. Beneficiaries fall into different categories: (1) active duty
servicemembers and their dependents, (2) eligible National Guard and
Reserve servicemembers and their dependents, and (3) retirees and their
dependents or survivors. In fiscal year 2009, active duty servicemembers
and their dependents represented 32 percent of the beneficiary
population, eligible National Guard and Reserve servicemembers and
their dependents represented 14 percent, and retirees and their
dependents or survivors made up the remaining 54 percent. 15
The management of DOD’s MHS crosses several organizational
boundaries. Reporting to the Under Secretary of Defense for Personnel
and Readiness, the Assistant Secretary of Defense for Health Affairs is
the principal advisor for all DOD health policies, programs, and force
health protection activities. Health Affairs issues policies, procedures, and
standards that govern management of DOD medical programs and has
the authority to issue DOD instructions, publications, and directive-type
memorandums that implement policy approved by the Secretary of
Defense or the Under Secretary of Defense for Personnel and Readiness.
It integrates the services’ budget submissions into a unified medical
budget that provides resources for DOD’s MHS operations. However,
15
GAO, Defense Health Care: 2008 Access to Care Surveys Indicate Some Problems,
but Beneficiary Satisfaction Is Similar to Other Health Plans, GAO-10-402 (Washington,
D.C.: Mar. 31, 2010).
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GAO-12-224 Defense Health Care
Health Affairs lacks direct command and control of the services’ military
treatment facilities. See figure 2 for the current organizational structure of
DOD’s MHS.
Figure 2: Current Governance Structure of the MHS
Operationally, DOD’s MHS has two missions: supporting wartime and
other deployments, known as the readiness mission, and providing
peacetime care, known as the benefits mission. The readiness mission
provides medical services and support to the armed forces during military
operations, including deploying medical personnel and equipment
throughout the world, and ensures the medical readiness of troops prior
to deployment. The benefits mission provides medical services and
support to members of the armed forces, retirees, and their dependents.
DOD’s dual health care mission is delivered by the military services at 59
military treatment facilities capable of providing diagnostic, therapeutic,
and inpatient care, as well as hundreds of clinics and private sector
civilian providers. The military treatment facilities make up what is known
as DOD’s direct care system for providing health care to eligible
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GAO-12-224 Defense Health Care
beneficiaries. The Departments of the Army and the Navy each have a
medical command, headed by a surgeon general, who manages each
department’s respective military treatment facilities and other activities
through a regional command structure. The Navy’s Bureau of Medicine
and Surgery supports both the Navy and Marine Corps. The Air Force
Surgeon General, through the role of medical advisor to the Air Force
Chief of Staff, exercises similar authority to that of the other surgeons
general. Each service also recruits, trains, and funds its own medical
personnel to administer the medical programs and provide medical
services to beneficiaries. For the management of military treatment
facilities within the National Capital Region and the execution of related
Base Realignment and Closure (BRAC) actions 16 in that area, an
additional medical organizational structure and reporting chain was
established in 2007. This structure is known as the Joint Task Force
National Capital Region Medical, whose Commander reports to the
Deputy Secretary of Defense, and the two inpatient medical facilities in
the area are considered joint commands assigned to the task force. DOD
also operates a purchased care system throughout the country that
consists of a network of private sector civilian primary and specialty care
providers. The TRICARE Management Activity, under the authority,
direction, and control of Health Affairs, is responsible for awarding,
administering, and managing these contracts.
Studies of Governance
Options for DOD’s Military
Health System
For many years, GAO and other organizations have highlighted a range
of long-standing issues surrounding DOD’s MHS and its efforts to
reorganize its governance structure. For example, in 1995, we reported
that interservice rivalries and conflicting responsibilities hindered
improvement efforts. We further noted that the services have historically
resisted efforts to change the way military medicine is organized,
including consolidating the services’ medical departments, in favor of
maintaining their own health care systems, primarily on the grounds that
each service has unique medical activities and requirements. Since the
1940s, there have been over 20 studies that have addressed military
health care organization.
16
The 2005 BRAC Commission recommended that certain patient care activities at Walter
Reed Army Medical Center in Washington, D.C., be relocated to the National Naval
Medical Center in Bethesda, Maryland, and to a new community hospital at Fort Belvoir,
Virginia.
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GAO-12-224 Defense Health Care
In October 2007, 17 we reported that DOD evaluated several options for
widespread reorganization and integration of its medical governance
structure, but it did not evaluate the option resulting in the seven
governance initiatives that it is currently implementing. 18 As part of its
evaluation, DOD commissioned CNA’s Center for Naval Analyses to
conduct a study to determine the cost savings associated with various
organizational options. In its report, 19 CNA’s officials estimated potential
savings from $281 million to $460 million annually, 20 and noted that any
merger or transformation needs to be well planned and executed to
realize potential benefits and efficiencies. 21 However, because the
services could not reach a consensus concerning which of the proposed
governance options to implement, in November 2006, the Deputy
Secretary of Defense approved the implementation of an alternative
option that consisted of seven targeted governance initiatives. 22 (See
table 1.)
17
GAO, Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and
Risks for Its Newly Approved Medical Command Structure, GAO-08-122 (Washington,
D.C.: Oct. 12, 2007).
18
Governance is defined as an entity’s ability to serve its constituents through the rules,
processes, and behaviors by which interests are articulated, resources are managed, and
power is exercised.
19
CNA’s Center for Naval Analyses, Cost Implications of a Unified Medical Command
(Alexandria, Va.: May 2006).
20
CNA’s Center for Naval Analyses developed the savings estimates, and GAO adjusted
the estimates from 2005 to 2010 dollars.
21
CNA’s Center for Naval Analyses categorized the potential savings into the following 10
areas: health care operations, comptroller operations, information management and
information technologies, education and training, research and development, logistics,
strategic planning, human capital management, force health protection and environmental
health, and general headquarters.
22
Action Memorandum for the Deputy Secretary of Defense, Joint/Unified Medical
Command (J/UMC) Way Ahead (Nov. 27, 2006).For purposes of this report, this memo
will be referred to as the November 2006 DOD memo.
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Table 1: The Seven Approved Military Health System Governance Initiatives
1. Create governance structures in the National Capital Area and in the San Antonio, Texas, area to command, control, and manage
a
the combined operations of the components’ respective Military Treatment Facilities
2. Create a governance structure to command, control, and manage the Joint Medical Education and Training Campus in San
a
Antonio, Texas
b
3. Colocate the MHS’s and services’ medical headquarters staff
4. Consolidate all medical research and development under the Army Medical Research and Material Command
5. Realign the TRICARE Management Activity and establish a Joint Military Health Service Directorate to consolidate shared services
and common functions
6. Realign the TRICARE Management Activity and establish a TRICARE Health Plan Agency to focus on health insurance plan
management
7. Create governance structures that consolidate command and control in multiservice medical markets (other than the National
c
Capital Region and San Antonio)
Source: DOD.
a
This initiative is related to a recommendation(s) from the 2005 BRAC Commission.
b
This initiative is a recommendation of the 2005 BRAC Commission.
c
Multiservice medical markets are areas in which more than one DOD component provides military
health care services.
Our analysis of the decision to implement this alternative concluded that
DOD did not complete a comprehensive analysis to support its decision.
Accordingly, we recommended in our October 2007 report that DOD
should assess the expected benefits, costs, and risks for implementing
these seven governance initiatives and develop performance measures to
monitor the progress of its plan. DOD concurred with our
recommendations and responded that it would form a team to conduct
comprehensive planning to include an assessment of implications for
doctrine, organization, training, material, leadership, personnel, and
facilities. In a follow-on March 2011 report on duplication, overlap, and
fragmentation in the federal government, 23 we stated that these analyses
had not been conducted, and Health Affairs had not provided guidance on
how and when to complete the governance initiatives. Additionally, we
emphasized that DOD needed to take action to reduce duplication in its
command structure and eliminate redundant processes by further
assessing alternatives for restructuring MHS governance.
Further, DOD officials implemented two separate efforts during 2011 to
address, among other things, rising military health costs. First, in March
23
GAO-11-318SP.
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2011, the Under Secretary of Defense for Personnel and Readiness
initiated a comprehensive review and evaluation of military health care to
develop a series of proposals aimed at increasing the performance and
efficiency of DOD’s MHS in a number of key areas. Additionally, in June
2011, the Deputy Secretary of Defense established a 90-day task force to
review various options for changes to the overall governance structure of
the MHS and of its multiservice medical markets. Subsequent to the
establishment of this task force, the National Defense Authorization Act
for Fiscal Year 2012 required DOD to submit a report to the congressional
defense committees to include (among other things) options considered
by the task force, the goals to be achieved by governance reorganization,
costs of each option considered, and an analysis of the strengths and
weaknesses of each option. 24 The Comptroller General is required to
review DOD’s report and report back to the congressional committees
within 180 days from DOD’s issuance. The act also prohibits the
Secretary of Defense from restructuring or reorganizing the MHS until 120
days after GAO submits its report.
DOD Has Identified
Initiatives Aimed at
Slowing Medical Cost
Growth but Has Not
Fully Applied ResultsOriented Management
Practices
DOD has identified 11 initiatives aimed at slowing medical cost growth,
but it has not fully applied results-oriented management practices to its
efforts. Specifically, it has developed an implementation plan and related
estimates of potential cost savings for only 1 of the 11 initiatives. As a
result, DOD has limited its effectiveness in implementing and monitoring
these initiatives and achieving related cost savings and other
performance goals.
24
National Defense Authorization Act for Fiscal Year 2012, Pub. L. No. 112-81, § 716
(2011).
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GAO-12-224 Defense Health Care
DOD Has Identified
Initiatives Aimed at
Slowing Medical Cost
Growth
The Senior Military Medical Advisory Council—a committee that functions
as an executive-level discussion and advisory group, 25 has approved 11
initiatives that it believes will help reduce rising health care costs. (See
table 2 for a list of these initiatives.) These 11 initiatives consist of
changes to MHS clinical and business practices in areas ranging from
primary care to psychological health care to purchased care
reimbursement practices. DOD’s initiatives generally reflect broader
concepts that were discussed by health care experts, business leaders,
and public officials at two separate forums convened by GAO in 2004 and
2007 on ideas for responding to cost and other challenges in the health
care system. 26 For example, in the 2004 forum, 55 percent of participants
strongly agreed that the U.S. health care system is characterized by both
underuse of wellness and preventive care and overuse of high-tech
procedures. In addition, the plenary speakers at the 2004 forum observed
that unwarranted variation in medical practices nationwide points to
quality and efficiency problems. Similarly, DOD developed initiatives that
seek to increase the productivity of and to ease access to primary care
and encourage wellness, preventive, and evidence-based 27 health care.
Further, in the 2007 forum, 77 percent of participants strongly agreed that
the federal government should revise its payment systems and leverage
its purchasing authority to foster value-based purchasing for health care
products and services. Similarly, MHS officials discussed potential
changes that led to the fourth and fifth initiatives as listed in table 2. Both
initiatives involve changes to payment for medical care to reward quality
of care and health outcomes instead of volume of services rendered.
Another of the 11 initiatives aims to reduce costs by keeping patients as
healthy as possible during treatment and recovery. With this initiative,
MHS officials hope to reach the goal of reducing hospital readmissions by
20 percent and hospital acquired infections by 40 percent by 2013 from
the baseline year of 2010.
25
This group is chaired by the Assistant Secretary of Defense for Health Affairs and
includes the surgeons general from the Army, the Navy, and the Air Force; the Joint Staff
Surgeon; and four deputy assistant secretaries of defense.
26
GAO, Comptroller General’s Forum: Health Care: Unsustainable Trends Necessitate
Comprehensive and Fundamental Reforms to Control Spending and Improve Value,
GAO-04-793SP (Washington, D.C.: May 2004), and Highlights of a Forum: Health Care
20 Years from Now: Taking Steps Today to Meet Tomorrow’s Challenges,
GAO-07-1155SP (Washington, D.C.: September 2007).
27
Evidence-based medicine is the integration of the best research evidence with clinical
expertise and patient values.
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GAO-12-224 Defense Health Care
DOD Has Not Fully
Developed ResultsOriented Management
Plans for Implementing Its
Health Care Initiatives
DOD has not fully developed results-oriented management plans for
implementing its health care initiatives, which could help ensure the
achievement of these initiatives’ cost savings goals. Specifically, we
found that as a start to managing the implementation of its initiatives,
DOD has developed a dashboard management tool that will include
elements such as an explanation of the initiative’s purpose, key
performance measures, and funding requirements for implementation. In
December 2011, the Senior Military Medical Advisory Council approved
six dashboards that were significantly, but not entirely completed. A
Health Affairs official stated that DOD currently lacks net cost savings
estimates for all but one of the initiatives. Cost savings estimates are
critical to successful management of the initiatives so that DOD can
achieve its goal of reducing growth in medical costs as stated in the 2010
Quadrennial Defense Review. Further, DOD developed an
implementation plan to support the dashboards. The implementation plan
has a set format to include such information as general timelines and
milestones, key risks, and estimated cost savings.
DOD currently has one completed implementation plan, which also
contains the one available cost savings estimate among all the initiatives.
See table 2 for the progress made for each of these initiatives.
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GAO-12-224 Defense Health Care
Table 2: Progress Made in Developing a Dashboard and Detailed Implementation Plan for Each of DOD’s Strategic Initiatives
as of January 13, 2012
Dollars in millions
Dashboard
approved?
Implementation
plan approved?
1. Implement Patient Centered Medical Home model of care to
increase satisfaction, improve care, and reduce costs


2. Integrate psychological health programs to improve outcomes
and enhance value

3. Implement incentives to encourage adherence to medical
standards based on evidence to increase patient satisfaction,
improve care, and reduce costs

4. Implement alternative payment mechanisms to reward value in
health care services

5. Revise DOD’s future purchased care contracts to offer more
and varied options for care delivery from private sector health
care providers

6. Improve the measurement and management of DOD’s
population health by moving away from focusing on illness and
disease to an emphasis on prevention, intervention, and
wellness by health care providers

Strategic initiative
Estimated net
a
savings
$39.3
7. Optimize pharmacy practices to improve quality and reduce
costs
8. Implement policies, procedures, and partnerships to meet
individual servicemembers’ medical readiness goals
9. Implement DOD and Department of Veterans Affairs joint
strategic plan for mental health to improve coordination
10. Implement modernized electronic health record to improve
outcomes and enhance interoperability
11. Improve governance to achieve better performance in
multiservice medical markets
Source: GAO analysis of DOD information.
a
The net savings represents GAO’s analysis based on DOD data. GAO did not independently assess
the reliability of DOD data. DOD estimates that its investment in the Patient Centered Medical Home
initiative will be $571.4 million in total from fiscal years 2010 through 2016.
As table 2 shows, DOD had completed a dashboard, an implementation
plan, and a cost savings estimate for only 1 of its 11 initiatives as of
January 13, 2012. As DOD completes its dashboards, implementation
plans, and cost savings estimates, it could benefit from the application of
the six characteristics of a comprehensive, results-oriented management
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GAO-12-224 Defense Health Care
framework, on which GAO has previously reported, 28 including a thorough
description of the initiatives’ mission statement; problem definition, scope,
and methodology; goals, objectives, activities, milestones, and
performance measures; resources and investments; organizational roles,
responsibilities, and coordination; and key external factors that could
affect the achievement of goals. DOD has completed an implementation
plan for 1 of its 11 initiatives—the Patient Centered Medical Home 29
initiative, which seeks to increase access to DOD’s primary care network.
Based on DOD data, we estimate that this initiative will have a net cost
savings of $39.3 million through fiscal year 2016. 30 Using the desirable
characteristics of a results-oriented management plan, we assessed the
one approved implementation plan, and our analysis of this plan showed
that DOD addressed four of the characteristics and partially addressed
two other characteristics. For an overview of the six desirable
characteristics of comprehensive, results-oriented management plans
and our assessment of the extent to which DOD’s Patient Centered
Medical Home implementation plan incorporates these desired
characteristics, see table 3.
28
GAO-04-408T.
29
For the Patient Centered Medical Home program, which seeks to increase access to
DOD’s primary care network, DOD has developed five measures to track progress in
terms of positively affecting emergency room utilization, patient satisfaction with health
care and appointment availability, primary care staff satisfaction, and the percentage of
the times patients receive care from their primary care managers.
30
We did not assess the reliability of DOD data.
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GAO-12-224 Defense Health Care
Table 3: Extent to Which the Patient Centered Medical Home Implementation Plan Addressed the Six Desired Characteristics
of Comprehensive, Results-Oriented Management Plans
Six desired characteristics of a comprehensive, results-oriented management plan
Our assessment of the Patient Centered
Medical Home implementation plan
(1) Mission statement—A comprehensive statement that summarizes the main purposes
of the plan.
●
(2) Problem definition, scope, and methodology—Presents the issues to be addressed by
the plan, the scope of its coverage, the process by which it was developed, and key
considerations and assumptions used in the development of the plan.
●
(3) Goals, objectives, activities, milestones, and performance measures—The
identification of goals and objectives to be achieved by the plan, activities or actions to
achieve those results, as well as milestones and performance measures.
●
(4) Resources and investments—The identification of costs to execute the plan and the
sources and types of resources and investments, including skills and technology and the
human, capital, information, and other resources required to meet the goals and
objectives.
◐
(5) Organizational roles, responsibilities, and coordination—The development of roles
and responsibilities in managing and overseeing the implementation of the plan and the
establishment of mechanisms for multiple stakeholders to coordinate their efforts
throughout implementation and make necessary adjustments to the plan based on
performance.
●
(6) Key external factors that could affect the achievement of goals—The identification of
key factors external to the organization and beyond its control that could significantly
affect the achievement of the long-term goals contained in the plan. These external
factors can include economic, demographic, social, technological, or environmental
factors, as well as conditions that would affect the ability of the agency to achieve the
results desired.
◐
Legend: ◐ = Partially addressed; ● = Addressed; ○ = Not addressed.
Source: GAO analysis of DOD data.
Our review of the Patient Centered Medical Home implementation plan
found that DOD partially addressed the desired characteristic regarding
resources and investments. While DOD acknowledged that some staff will
be committed full-time to working on this initiative, it did not show in the
plan, as prescribed, the number of personnel needed in total to implement
the initiative. A DOD official noted that the section in the plan that asks for
the number of personnel needed was intended for officials to show if
additional personnel and funding beyond the current level were needed.
However, the absence of information concerning DOD’s use of current
staff renders the size of the initiative’s impact on utilization of personnel
unclear. In addition, the Patient Centered Medical Home implementation
plan’s annual cost savings estimate did not reflect net losses when they
occur in a given fiscal year. For example, in fiscal years 2012 and 2013,
DOD’s investment in the Patient Centered Medical Home initiative is
larger than savings, but the implementation plan does not show the net
Page 16
GAO-12-224 Defense Health Care
losses for those early years. 31 Instead, it shows zero cost savings for
those years. A DOD official responded by noting that DOD interpreted
estimated savings to only include actual savings in any given year and
not net losses. However, without accounting for both cost savings and
investments, decision makers lack a comprehensive understanding of a
program’s true costs.
Additionally, our review of this implementation plan found that DOD
partially addressed the desired characteristic of discussing the key
external factors that could have an impact on the achievement of goals.
While it provided an extensive overview of internal and external
challenges, DOD did not outline a specific process for monitoring such
developments. Further, the implementation plan does not fully explore the
effect of such challenges on the program’s goals or explain how it takes
such challenges into account, such as by outlining a mitigation strategy to
overcome them.
As DOD further develops its dashboards and implementation plans and
incorporates the desired characteristics, it will be in a stronger position to
better manage its reforms and ultimately achieve cost savings. For
example, DOD was experiencing a 5.5 percent annual increase in per
capita costs for its enrolled population according to data available as of
December 2011, but DOD had set its target ceiling for per capita health
care cost increases for fiscal year 2011 at a lower rate of 3.1 percent.
According to DOD calculations using 2011 enrollee and cost data, if DOD
had met its target ceiling of 3.1 percent increase as opposed to a 5.5
percent increase, the 2.4 percent reduction would have resulted in
approximately $300 million in savings. As DOD’s initiatives evolve and
each of these management tools is completed for each of the initiatives,
they may provide DOD with a road map to improve its efforts to
implement, monitor progress toward, and achieve both short-term and
longer-term financial and other performance goals.
31
GAO’s calculation of the cost savings for the Patient Centered Medical Home initiative
as shown in table 2 takes both net savings and total net losses into account.
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GAO-12-224 Defense Health Care
DOD Is in the Initial Stages
of Developing a Monitoring
Process for Measuring the
Progress of Its Health Care
Initiatives
DOD also has not completed the implementation of an overall process for
monitoring progress across its portfolio of health care initiatives and has
not completed the process of identifying accountable officials and their
roles and responsibilities for all of its reform efforts. Our work on resultsoriented management has found that a process for monitoring progress is
key to success. 32 We have also reported that clearly defining areas of
responsibility is a key process that provides management with a
framework for planning, directing, and controlling operations to achieve
goals. 33 In addition, as MHS leaders develop and implement their plans to
control rising health care costs, they will need to work across multiple
authorities and areas of responsibility. As the 2007 Task Force on the
Future of Military Health Care noted, the current MHS does not function
as a fully integrated health care system. 34 As we reported in October
2005, 35 agreement on roles and responsibilities is a key step to
successful collaboration when working across organizational boundaries,
such as the military services. Committed leadership by those involved in
the collaborative effort, from all levels of the organization, is also needed
to overcome the many barriers to working across organizational
boundaries. For example, Health Affairs centrally manages Defense
Health Program funds for the military services, but it lacks direct
command and control of the military treatment facilities. Additionally, we
reported in September 2005 36 that the commitment of agency managers
to results-oriented management is an important practice to help increase
the use of performance information for policy and program decisions.
DOD’s one approved implementation plan for the Patient Centered
Medical Home initiative provides further information on how DOD has
applied a monitoring structure, defined accountable officials, and
assigned roles and responsibilities in the case of this initiative. Senior
officials stated that they plan to monitor performance, specifically cost
32
GAO, Results-Oriented Government: GPRA Has Established a Solid Foundation for
Achieving Greater Results, GAO-04-38 (Washington, D.C.: Mar. 10, 2004).
33
GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1
(Washington, D.C.: November 1999).
34
Defense Health Board, Task Force on the Future of Military Health Care.
35
GAO, Results-Oriented Government: Practices That Can Help Enhance and Sustain
Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 21, 2005).
36
GAO, Managing for Results: Enhancing Agency Use of Performance Information for
Management Decision Making, GAO-05-927 (Washington, D.C.: Sept. 9, 2005).
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GAO-12-224 Defense Health Care
savings, and said that if projected cost savings were not realized, senior
leadership would reconsider further investment in the program. We
reported that in some instances, up-front investments are needed to yield
longer-term savings and that it is essential for officials to monitor and
evaluate whether the initiative is meeting its goals. 37 However, DOD has
not completed this process for the remainder of its initiatives. Without
sustained top civilian and military leadership which is consistently
involved throughout the implementation of its various initiatives and until
DOD fully implements for all of its initiatives a mechanism to monitor
performance and identify accountable officials, including their roles and
responsibilities, DOD may be hindered in its ability to achieve a more
cost-efficient MHS and at the same time address its medical readiness
goals, improve its overall population health, and improve its patients’
experience of care.
Some Governance
Initiatives Have Been
Implemented, but
DOD Has Not Fully
Employed Key
Management
Practices
Beyond the medical initiatives designed to slow medical cost growth,
DOD has taken steps to implement several other initiatives designed to
improve MHS governance. However, DOD officials have not fully
employed several key management practices to help ensure that these
medical governance initiatives will achieve their stated goals.
DOD Has Taken Steps to
Implement Its Seven
Governance Initiatives
DOD has to varying degrees taken steps to implement some of the seven
governance initiatives approved by the Deputy Secretary of Defense in
2006 with the goal of achieving economies of scale, operational
efficiencies, and financial savings as well as consolidating common
support functions and eliminating administrative redundancies. In 2007,
after the initiatives were approved, we recommended that DOD
demonstrate a sound business case for proceeding with these initiatives
to include providing detailed qualitative and quantitative analyses of
benefits, costs, and associated risks. Initially, DOD expected that the
37
GAO, Streamlining Government: Key Practices from Select Efficiency Initiatives Should
Be Shared Governmentwide, GAO-11-908 (Washington, D.C.: Sept. 30, 2011).
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GAO-12-224 Defense Health Care
seven initiatives would save at least $200 million annually once
implemented. However, more than 5 years later, DOD officials have
projected estimated financial savings for only one of the seven initiatives
concerning the governance and management of the MHS—an initiative to
consolidate the command and control structure of its health services
within the National Capital Region. 38 Similarly, as part of a separate
initiative aimed at increasing efficiency and conserving funds, DOD
consolidated its operations at the Naval Health Clinic Great Lakes with
the Department of Veterans Affairs’ (VA) North Chicago Veterans Affairs
Medical Center, but has not measured its progress in achieving financial
savings. 39 Officials said that many of the governance initiatives have
significant potential for cost savings, and some of these governance
initiatives have already achieved various efficiencies. However, financial
savings have not been demonstrated for the majority of the initiatives
because most have not been fully implemented. For those that have been
implemented, such as the Joint Medical Education and Training Campus
in San Antonio, Texas, officials stated that they were unable to develop
baseline training costs against which to measure future costs and
potential savings. However, the governance structure to command,
control, and manage operations at the campus has resulted in the
consolidation of 39 of 64 courses. According to officials, this has resulted
in efficiencies such as the standardization of pharmacy clinical policy
across the services. Table 4 lists the steps DOD has taken to implement
the seven governance initiatives, the results of those actions, and
potential opportunities to achieve additional cost savings and efficiencies.
38
In addition to the one documented estimate of financial savings, there may be
additional cost savings or costs incurred as a result of the BRAC actions related to these
initiatives.
39
In 2011, we reported on the progress that the joint venture had made toward achieving
the integration areas identified in the executive agreement between DOD and VA. GAO,
VA and DOD Health Care: First Federal Health Care Center Established, but
Implementation Concerns Need to Be Addressed, GAO-11-570 (Washington, D.C.:
July 19, 2011).
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GAO-12-224 Defense Health Care
Table 4: Status of the Seven Approved Military Health System Governance Initiatives
Steps taken
Outcomes achieved
Potential additional opportunities
Create governance structures to command and control the combined operations at the military treatment facilities in the
National Capital Area and in the San Antonio, Texas area
b
Joint Task Force National Capital
Region Medical officials expect
consolidation to eventually reduce
contractor and civilian personnel,
which they estimate will decrease
costs by $60 million per year by
fiscal year 2016.
b
San Antonio Military Health System
officials expect that the collaborative
governance structure will assist
commanders with optimizing
available medical resources and
reallocating resources to prevent or
eliminate redundant operations
within the San Antonio area.
Additionally, officials anticipate that
efficiencies and associated cost
savings will result from the area’s
shared beneficiary population,
facilities, and mission.
In 2007, the Deputy Secretary of
Financial savings achieved for Joint Task Force
Defense established the standing
National Capital Region Medical:
Joint Task Force National Capital
•
Joint Task Force officials reported that they had a
a
Region Medical to deliver military
onetime savings of about $109 million for fiscal year
health care within the National Capital
2009 through the use of one consolidated contract to
Region using all available military
cover the equipment and relocation costs for the
health care resources and to manage
hospitals being built or renovated under this
the BRAC-directed consolidation of
recommendation and to employ bulk buying power
medical service in the National
to save money.
Capital Region.
•
Joint Task Force officials stated that the new unified
human resources center resulted in a reduction of
nine full-time positions and a new joint referral and
appointment office achieved $0.2 million in recurring
annual savings from staffing efficiencies.
Estimates from the fiscal year 2011 BRAC budget
request project an annual recurring savings of
$172 million for the 13 separate actions associated with
the BRAC recommendation related to this initiative (2 of
which are closely related to the establishment of the Joint
c
Task Force National Capital Region Medical). However,
our analysis has shown that the up-front costs for the
actions under this recommendation are so great that they
more than offset the annual recurring savings that might
accrue. Therefore, this BRAC action very likely will not
provide any savings over the 20-year projected payback
d
period.
In September 2010, the Army and Air
Force Chiefs of Staff signed a
memorandum of agreement
establishing a collaborative
organization known as the San
Antonio Military Health System that
will provide oversight for clinical,
educational, and business operations
for the San Antonio area.
Financial savings achieved for the San Antonio
Military Health System: The staffing for this office was
accomplished through the reallocation of existing
personnel. While agency officials report no documented
savings associated with this initiative, they believe that
establishing the San Antonio Military Health System
governance structure will save money. However, they
state that it is too early to quantify the savings. Estimates
from the fiscal year 2011 BRAC budget request for a
related BRAC recommendation projected an annual
c
savings of $6.8 million. However, our analysis has
shown that the up-front costs for the actions under this
recommendation are so great that they more than offset
the annual recurring savings that might accrue.
Therefore, this BRAC action very likely will not provide
d
any savings over the 20-year projected payback period.
Page 21
GAO-12-224 Defense Health Care
Steps taken
Outcomes achieved
Potential additional opportunities
Create a governance structure to command, control, and manage the Joint Medical Education and Training Campus in
San Antonio, Texas
The Army, Navy, and Air Force
signed a memorandum of agreement
that outlines the command and
control structure for the BRACdirected establishment of the joint
Medical Education Training Campus
in San Antonio, which reduced the
number of enlisted medical training
locations from five to one.
b
Financial savings : While agency officials report no
documented savings associated with this initiative, they
believe that by reducing the number of overall training
locations money has been saved and other efficiencies
have been achieved. However, estimates from the fiscal
year 2011 BRAC budget request project an annual
c
savings of $97.1 million. This estimate includes savings
from changes in the cost of military personnel, civilian
personnel, operations and maintenance, overhead, and
other expenses.
Other nonfinancial outcomes achieved: According to
senior officials, 39 of the 64 named programs of
instruction have been consolidated and are achieving
nonfinancial efficiencies. For example, senior officials
stated that colocating
•
the pharmacy training provided the opportunity for
differences in clinical policy across services to be
identified and standardized and
•
courses for X-ray and dental technicians provided
the opportunity to standardize and raise the quality
of instruction across the services.
Officials stated that they will
continue to investigate ways to
consolidate the remaining 25
programs of instruction, which could
lead to further financial and
nonfinancial benefits in the future.
Officials stated that they are in the
process of developing an
accounting system that will be able
to track the cost per course, per
class, per service, and per student.
Colocate the MHS’s and services’ medical headquarters staff
DOD leased a building for the BRACdirected colocation of Health Affairs,
the TRICARE Management Activity,
and the military services’ medical
headquarters staff, and renovations to
that building are under way. However,
the staff are not scheduled to move
into the building until the summer of
2012.
b
Financial savings : Agency officials report no realized
savings associated with this initiative, and estimates from
the fiscal year 2011 BRAC budget request project this
c
initiative to increase costs annually by $0.9 million.
According to officials, projected increases are the result
of the decision to lease a building, as opposed to the
original plan to renovate an existing building or build a
new facility.
Page 22
Officials believe the colocation will
provide more opportunities for the
different services to collaborate and
consolidate functions or share
services thus possibly producing
efficiencies and cost savings in the
future. However, according to
diagrams provided by Health Affairs
officials, MHS and each of the
services’ personnel are segregated
in different wings of the building,
which could hinder opportunities for
collaboration and further
consolidation of functions.
GAO-12-224 Defense Health Care
Steps taken
Outcomes achieved
Potential additional opportunities
Consolidate all medical research and development under the Army Medical Research and Material Command (MRMC)
Officials stated that Health Affairs and
MRMC agreed to a management
arrangement that resulted in the Army
managing two-thirds to three-fourths
of DOD’s medical research and
development funding, mostly from the
Army and the Defense Health
Program.
Financial savings: Agency officials report no
documented savings associated with this initiative.
However, officials stated that Health Affairs avoided
establishing a duplicative structure for the management
of its increased research and development funding by
using the existing Army research and development
management structure already in place at MRMC. Health
Affairs reimburses the Army for costs related to this
effort.
Approximately one-fourth to onethird of medical research and
development is not centrally
managed, but according to officials,
DOD has no plans to consolidate
that funding. A 2008 DOD
assessment concluded that a single
consolidated medical research and
development budget structure with
centralized planning, programming,
and budgeting authority along with
centralized management would
provide the most efficient and
effective process and governance
e
for the investment. Further, GAO
recently reported that multiple
entities play roles in psychological
health and traumatic brain injury
health care activities, but none
f
serves as a coordinating authority.
Realign TRICARE Management Activity and establish a Joint Military Health Service Directorate to consolidate shared
services and common functions
Realign TRICARE Management Activity and establish a TRICARE Health Plan Agency to focus on health insurance plan
management
In March 2011, Secretary Gates
approved an Assistant Secretary of
Defense for Health Affairs
recommendation to reorganize the
TRICARE Management Activity and
establish the Military Health System
Support Activity consisting of four
divisions: (1) Uniformed Services
University of the Health Sciences,
(2) TRICARE health plan, (3) Health
Management Support, and (4) Shared
Services division.
b
Financial savings : Agency officials report no realized
savings associated with this initiative; however, Health
Affairs reduced the fiscal year 2012 Defense Health
Program budget request by $51 million and reduced
estimates for future year requests by the same amount
anticipating the establishment of the Military Health
System Support Activity.
If additional consolidation of shared
support activities occurs not only
within the TRICARE Management
Activity but among the services also,
officials indicated that additional
cost savings may be possible. For
example, the services could reduce
overhead costs by consolidating
corporate-level functions, such as
human capital management,
finance, support, and logistics.
Create governance structures that consolidate command and control of the military treatment facilities in multiservice
markets (other than the National Capital Region and San Antonio)
In June 2011, the Deputy Secretary of Financial savings: Agency officials report no realized
Defense established a team to study savings associated with this initiative.
the governance in these multiservice
markets and to recommend any
necessary changes to their structure.
The task force completed its work in
September 2011, but DOD has made
no changes to the governance
structures of current multiservice
markets throughout MHS.
Page 23
DOD documentation supporting the
development of the November 2006
memo approved by the Deputy
Secretary of Defense stated that the
services agreed that there is a
significant opportunity to improve
health services delivery at the
market or regional levels, especially
where two or more services operate,
by empowering a single commander
with clear authority over programs,
budget, and personnel.
GAO-12-224 Defense Health Care
Source: GAO analysis of DOD information.
a
A joint task force is a jointly manned and operated force that is designated by the Secretary of
Defense (among others) that may be established on a geographical area or functional basis when the
mission has a specific limited objective and does not require overall centralized control of logistics,
such as the Joint Task Force National Capital Region Medical, which covers both geographical and
functional bases.
b
GAO did not independently assess the reliability of this cost savings estimate.
c
The estimates were obtained from the electronic version of the fiscal year 2011 BRAC budget
request and not the published document. We and the BRAC Commission believe that DOD’s net
annual recurring savings estimates are overstated because DOD includes savings from eliminating
military personnel positions without corresponding decreases in end strength. DOD disagrees with
our position. See GAO, Military Base Realignments and Closures: Estimated Costs Have Increased
While Savings Estimates Have Decreased Since Fiscal Year 2009, GAO-10-98R (Washington, D.C.:
Nov. 13, 2009).
d
We used net present value analysis to determine whether future annual savings achieved by BRAC
action would exceed their up-front costs. Net present value is a financial calculation that accounts for
the time value of money by determining the present value of future savings minus up-front investment
costs over a specific period of time. Determining net present value is important because it illustrates
both the up-front investment costs and long-term savings in a single amount. In the context of BRAC
implementation, net present value is calculated for a 20-year period from 2006 through 2025.
e
See Dr. Robert E. Foster, Captain C. Douglas Forcino, MSC, USN, and Dr. Frederick Pearce,
“Guidance for the Development of the Force FY2010–2015, Program and Budget Assessment A4.16,
Medical Research and Development Investments,” prepared for the Under Secretary of Defense for
Acquisitions, Technology and Logistics (June 2008).
f
GAO, Defense Health: Coordinating Authority Needed for Psychological Health and Traumatic Brain
Injury Activities, GAO-12-154 (Washington, D.C.: Jan. 25, 2012).
DOD Did Not Fully
Employ Key Management
Practices
Although DOD has achieved varying levels of implementation of its MHS
governance initiatives, it did not consistently employ several key
management practices found at the center of successful mergers,
acquisitions, and transformations. Further, BRAC implementation
requirements drove implementation progress for a number of initiatives.
At a GAO forum in September 2002, leaders with experience managing
large-scale organizational mergers, acquisitions, and transformations
identified at least nine key practices and lessons learned from major
private and public sector organizational mergers, acquisitions, and
transformations. 40 During the course of our work examining DOD’s health
care initiatives, we determined that six of the key practices identified at
our 2002 forum were especially important to ensure that DOD has the
framework needed to implement its governance initiatives: (1) a focus on
a key set of principles and priorities that are embedded in the
organization to reinforce the new changes, (2) coherent mission and
integrated strategic goals to guide the transformation, (3) implementation
40
GAO-03-669.
Page 24
GAO-12-224 Defense Health Care
goals and a timeline to build momentum and show progress from day
one, (4) a communication strategy to create shared expectations and
report related progress, (5) a dedicated implementation team with the
responsibility and authority to drive the department’s governance
initiatives, and (6) committed and sustained leadership. 41
Focus on a Key Set of
Principles and Priorities at the
Outset of the Transformation
To its credit, DOD developed a set of guiding principles to facilitate its
transformation of DOD’s medical command structure. A clear set of
principles and priorities can serve as a framework to help the agency
create a new culture and drive employee behavior. For example, a set of
core values can become embedded in every aspect of the organization
and can serve as an anchor that remains valid and enduring while
organizations, personnel, programs, and processes change. Senior DOD
officials developed a set of guiding principles to direct efforts throughout
the governance transformation. These principles and goals were included
in the November 2006 memorandum: (1) provide a healthy, fit and
protected force; (2) create a trained, ready, and highly capable medical
force that delivers superior medical support; and (3) ensure efficient
delivery of a comprehensive health benefit to eligible beneficiaries.
Establish a Coherent Mission
and Integrated Strategic Goals
to Guide the Transformation
Although DOD provided initial guidance and strategic goals in its
November 2006 memorandum, it did not follow leading results-oriented
strategic planning guidance by establishing performance measures. As
we have previously reported, effective implementation includes adopting
leading practices for results-oriented strategic planning and reporting,
such as establishing specific and measurable performance measures for
the transformed organization. 42 In addition, intermediate measures can be
used to provide information on interim results and show progress toward
intended results. 43 DOD provided initial guidance, which includes strategic
41
We determined that DOD’s use of each of these six of the practices was relevant
because DOD either employed a practice to some degree or the practice was appropriate
given DOD’s position in the transformational process and therefore it should have
employed the practice. However, this exception on our part does not suggest that DOD
should not employ the other three practices in the future. As DOD progresses through the
change process, DOD should consider employing all of the key practices to help ensure a
successful transformation. For a more detailed discussion concerning our methodology for
assessing DOD’s application of these key practices, see app. I of this report.
42
GAO-03-669.
43
GAO, DOD’s High-Risk Areas: Challenges Remain to Achieving and Demonstrating
Progress in Supply Chain Management, GAO-06-983T (Washington, D.C.: July 25, 2006).
Page 25
GAO-12-224 Defense Health Care
goals to assist in the implementation of the governance transformation.
For example, the memo provided that lessons learned from the
consolidation and realignment of health care delivery within the National
Capital Region and San Antonio be used as the basis for establishment of
similar structures in other multiservice medical markets. However, MHS
officials stated that Health Affairs did not fully monitor and evaluate the
progress of its governance initiatives using performance measures.
Specifically, DOD leaders stated that specific measures to evaluate the
outcomes of the different governance approaches taken in these two
locations had not been established. Therefore, DOD lacked information
that would be useful in deciding if governance changes are needed in
other multiservice medical markets. Such measurable outcomes provide
the information DOD needs to determine if it is meeting its goals, make
informed decisions, and track the progress of the governance
transformation activities.
Set Implementation Goals and
a Timeline to Build Momentum
and Show Progress from Day
One
The November 2006 memorandum provided a brief, initial 3-year
timetable for the implementation of the governance transformation
initiatives; however, this timetable is high level and did not contain interim
dates indicating progress. Besides meeting the approval date of the
memorandum, MHS officials did not meet any of the other major dates
that were set in the timetable. We have reported that establishing
implementation goals and a timeline is critical to ensuring success, as
well as pinpointing performance shortfalls and gaps and suggesting
midcourse corrections. 44 A transformation, such as changing DOD’s MHS
governance, is a substantial commitment that could take years before it is
completed and therefore must be carefully managed and monitored to
achieve success. At a minimum, successful mergers and transformations
should have careful and thorough interim plans in place well before the
effective implementation date. 45 However, the timetable lacked any
interim goals. While DOD has made progress in implementing the three
initiatives that were related to BRAC recommendations, this is most likely
because DOD was required by law to complete most implementation of
BRAC recommendations by September 15, 2011, and to have a
monitoring process in place to support these efforts. These three
44
GAO-03-669.
45
GAO, Highlights of a GAO Forum: Mergers and Transformation: Lessons Learned for a
Department of Homeland Security and Other Federal Agencies, GAO-03-293SP
(Washington, D.C.: Nov. 14, 2002).
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GAO-12-224 Defense Health Care
initiatives are (1) create governance structures to command, control, and
manage the combined operations at the military treatment facilities in the
National Capital Area and in the San Antonio, Texas, area; (2) create a
governance structure to command, control, and manage the Joint Medical
Education and Training Campus in San Antonio, Texas; and (3) colocate
Health Affairs, TMA, and the services’ medical headquarters staff.
However, the latest completion date for the colocation of the Health
Affairs, TMA, and the services’ medical headquarters staff is the summer
of 2012. DOD’s governance initiatives may have been better implemented
if MHS officials had maintained a long-term focus on the transformation
by setting both short- and long-term goals to show progress and
developing a more complete and specific timetable to guide the efforts.
Establish a Communication
Strategy to Create Shared
Expectations and Report
Related Progress
DOD has not established an effective and ongoing communication
strategy to allow MHS officials to distribute information about its
governance changes early and often. Key practices suggest that a
transforming organization develop a comprehensive communication
strategy that reaches out to employees, customers, and stakeholders and
seeks to genuinely engage them in the transformation process. This
includes communicating early and often to build trust, ensuring
consistency of message, encouraging two-way communication, and
providing information to meet specific needs of employees. While MHS
officials communicated their transformation initiatives in the 2007
TRICARE Stakeholders’ Report, subsequent reports did not contain any
references to the governance initiatives. In addition, the 2008 Military
Health System Strategic Plan 46 references a goal to “improve governance
by aligning authority and accountability” as a strategic priority; however,
the plan does not elaborate on how this goal will be met, and it has not
been reissued since. Furthermore, the lack of a communication strategy
is evident based on the fact that officials in San Antonio responsible for
the initiatives related to establishing the Joint Medical Education and
Training Campus and San Antonio Military Health System told us they
were unaware of the approved governance initiatives. DOD has not
developed an approach to communicate its governance transformation
initiatives with stakeholders to ensure that they have a basic
understanding of their role and involvement. Without a comprehensive
communication strategy, MHS officials will remain limited in their ability to
46
DOD, The Military Health System Strategic Plan: A Roadmap for Medical
Transformation (Summer 2008).
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GAO-12-224 Defense Health Care
gain support for the governance transformation. Further, this lack of
communication can create confusion or a lack of awareness among
stakeholders, which can place the success of DOD’s initiatives at risk.
Dedicate a Transition Team to
Implement MHS Governance
Transformation
DOD did not form an overarching implementation team for all seven of its
initiatives to direct their progress. Our prior work has shown that a
dedicated team vested with necessary authority and resources to help set
priorities, make timely decisions, and move quickly to implement
decisions is critical for a successful transformation. 47 As we have
previously reported, a strong and stable implementation team responsible
for day-to-day management is important to ensuring that a transformation
effort receives the focused, full-time attention needed to be sustained and
successful. The Deputy Secretary of Defense’s November 2006
memorandum directed DOD to build such a team by 2007. Instead,
according to a DOD official, it initiated independent transition teams to
guide the implementation of some of its initiatives, such as the Joint Task
Force National Capital Region Medical and the colocation of the MHS’s
and the services’ medical headquarters staff. The lack of an overarching
implementation team likely hampered progress and contributed to uneven
progress in the implementation of the initiatives.
Ensure That Top Leadership
Drives the Transformation
DOD leadership did not provide the sustained direction needed to help
ensure progress of its MHS governance transformation. We previously
reported that leadership sets the direction, pace, and tone for the
transformation and provides sustained attention over the long term. In
addition, top leaders who are clearly and personally involved in mergers
or transformations can help to provide stability during such tumultuous
times. 48 Since the approval of the governance initiatives in 2006, DOD
leadership has not provided such direction. While progress was made in
implementing three of the initiatives, BRAC statutory requirements
provided an additional impetus for this progress. As noted above,
leadership’s failure to establish performance measures, set interim
implementation dates, establish a communication strategy, and establish
an implementation team may have hampered the initiatives’ progress. For
example, DOD made no progress in the realignment of the TRICARE
Management Activity to create separate units focused on shared services
and health insurance plan management until the 2010 Secretary of
47
GAO-03-669.
48
GAO-03-669.
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GAO-12-224 Defense Health Care
Defense internal efficiencies review. Further, officials told us that the lack
of Senate-confirmed, presidentially appointed leadership also presented
challenges in moving forward with governance changes. For example, the
position of the Under Secretary of Defense for Personnel and Readiness
was vacant from January 2009 to February 2010, and the position of
Assistant Secretary of Defense for Health Affairs was vacant from April
2009 to January 2011. According to officials, these vacancies hindered
progress toward greater unification, as someone temporarily filling the
position may be reluctant to make major decisions to change the strategic
direction of the MHS. Without involved and sustained military and civilian
leadership being held accountable to guide and sustain progress of its
initiatives, it may be difficult for the department to fully and successfully
achieve its governance transformation.
Overall, DOD did not consistently employ key management practices to
help improve the implementation of its MHS governance initiatives or to
evaluate the extent to which it accomplished the initiatives’ costs savings
and other performance goals. As a result, the gaps we identified may
have created risks that undermined DOD’s efforts as it began to
implement its plans. Specifically, without key management practices in
place, DOD lacks both a day-to-day and long-term focus on achieving its
goals and accountability to guide and sustain progress of its initiatives.
Conclusions
If military health care costs continue to rise at their current rate, they will
consume an increasingly large portion of the defense budget and
potentially divert funding away from other critical DOD priorities. MHS
medical-related and governance-related initiatives represent potential
opportunities to implement more efficient ways of doing business, reduce
overhead, and slow the rate of cost growth while continuing to meet the
needs of military personnel, retirees, and their dependents. While DOD
has developed a number of medical initiatives aimed at slowing health
care cost increases, successful implementation will depend upon
incorporating characteristics of results-oriented management practices,
sustaining top military and civilian leadership that holds officials
accountable for achieving agency goals, and establishing clear cost
savings targets where applicable. By fully employing the characteristics of
results-oriented management with greater attention to its investments and
resources and key external factors that could affect the achievement of its
goals, DOD will gain more assurance that it is effectively managing its
health care initiatives and saving money. Additionally, opportunities exist
for an improved governance structure that can result in direct cost
savings but also help to drive clinical savings. As DOD moves forward
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GAO-12-224 Defense Health Care
with its governance, clinical, and other initiatives, significant financial
savings as well as other efficiencies may be possible with the appropriate
level of management attention to ensure success. With sound decision
making and analysis and by consistently employing key management
practices throughout their implementation, DOD officials will be in a
position to make informed decisions, to better measure DOD’s progress
toward its cost and performance goals, and to be more assured that their
efforts yield necessary improvements and achieve efficiencies within the
MHS.
Recommendations for
Executive Action
Agency Comments
In order to enhance DOD’s efforts to manage rising health care costs and
demonstrate sustained leadership commitment for achieving the
performance goals of the MHS’s strategic initiatives, we recommend that
the Under Secretary of Defense for Personnel and Readiness direct the
Assistant Secretary of Defense for Health Affairs, in conjunction with the
service surgeons general, to take the following three actions:
•
Complete and fully implement, within an established time frame, the
dashboards and detailed implementation plans for each of the
approved health care initiatives in a manner that incorporates the
desired characteristics of results-oriented management practices,
such as the inclusion of performance metrics, investment costs, and
cost savings estimates.
•
Complete the implementation of an overall monitoring process across
DOD’s portfolio of initiatives for overseeing the initiatives’ progress
and identifying accountable officials and their roles and
responsibilities for all of its initiatives.
•
Complete the implementation of the governance initiatives that are
already under way by employing key management practices in order
to show financial and nonfinancial outcomes and to evaluate both
interim and long-term progress of the initiatives.
In written comments provided in response to a draft of this report, DOD
concurred with our findings and recommendations. Regarding our first
recommendation to complete and fully implement, within an established
time frame, the dashboards and detailed implementation plans for each of
the approved health care initiatives in a manner that incorporates the
desired characteristics of results-oriented management practices, DOD
concurred and noted that it anticipates that these dashboards and
detailed implementation plans will be fully implemented within a year.
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GAO-12-224 Defense Health Care
Regarding our second recommendation to complete the implementation
of an overall monitoring process across DOD’s portfolio of initiatives for
overseeing the initiatives’ progress and identifying accountable officials
and their roles and responsibilities, DOD concurred and noted that such a
system is being implemented and it anticipates that the overall monitoring
process will also be fully implemented within a year. Regarding our third
recommendation to complete the implementation of the governance
initiatives that are already under way by employing key management
practices in order to show financial and nonfinancial outcomes, DOD
concurred and noted that the department will take further action once the
legislative requirements concerning its submitted task force report on
MHS governance have been fulfilled. DOD noted that it will employ key
management practices in order to identify financial and nonfinancial
outcomes. DOD’s comments are reprinted in their entirety in appendix II.
We are sending copies of this report to the Secretary of Defense, the
Deputy Secretary of Defense, the Under Secretary of Defense for
Personnel and Readiness, the Assistant Secretary of Defense (Health
Affairs), the Surgeon General of the Air Force, the Surgeon General of
the Army, the Surgeon General of the Navy, the Commander, Joint Task
Force, National Capital Region Medical, and interested congressional
committees. In addition, the report is available at no charge on the GAO
website at http://www.gao.gov.
If you or your staff have any questions regarding this report, please
contact me at (202) 512-3604 or farrellb@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made key contributions to this
report are listed in appendix III.
Brenda S. Farrell
Director
Defense Capabilities and Management
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GAO-12-224 Defense Health Care
List of Committees
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Daniel K. Inouye
Chairman
The Honorable Thad Cochran
Ranking Member
Subcommittee on Defense
Committee on Appropriations
United States Senate
The Honorable Howard P. “Buck” McKeon
Chairman
The Honorable Adam Smith
Ranking Member
Committee on Armed Services
House of Representatives
The Honorable C.W. Bill Young
Chairman
The Honorable Norman D. Dicks
Ranking Member
Subcommittee on Defense
Committee on Appropriations
House of Representatives
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
Appendix I: Scope and Methodology
To obtain general background information, we obtained and reviewed
various directives, instructions, and policies that defined the organization,
structure, and roles and responsibilities of the Military Health System’s
(MHS) key leaders.
To determine the extent to which the Department of Defense (DOD) has
identified initiatives to reduce health care costs and applied resultsoriented management practices in developing plans to implement and
monitor them, we interviewed DOD officials concerning their approach to
this challenge and examined documentation of related plans and policies.
Specifically, we interviewed DOD officials in the Health Budgets and
Financial Policy Office and in the Office of Strategy Management, within
the Office of the Assistant Secretary of Defense for Health Affairs (Health
Affairs), as well as officials in the TRICARE Management Activity
concerning their 11 health care initiatives and obtained and reviewed
documentation concerning their efforts. We compared DOD’s efforts to
our prior work on the desirable characteristics of comprehensive, resultsoriented management and noted any differences.
We compared DOD’s one available implementation plan, concerning the
Patient Centered Medical Home initiative, to key practices that guide
federal agencies’ approaches to strategic planning efforts by examining
the extent to which the implementation plan contained the desirable
characteristics of a comprehensive, results-oriented management
framework. To perform this comparison, we developed a data collection
instrument that contained desirable characteristics and elements that help
establish comprehensive strategies using information from prior GAO
work examining national strategies and logistics issues. The data
collection instrument included the following six desirable characteristics:
1. Mission statement: A comprehensive statement that summarizes the
main purposes of the plan.
2. Problem definition, scope, and methodology: Presents the issues to
be addressed by the plan, the scope of its coverage, the process by
which it was developed, and key considerations and assumptions
used in the development of the plan.
3. Goals, objectives, activities, milestones, and performance measures:
The identification of goals and objectives to be achieved by the plan,
activities or actions to achieve those results, as well as milestones
and performance measures.
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
4. Resources and investments: The identification of costs to execute the
plan and the sources and types of resources and investments,
including skills and technology and the human, capital, information,
and other resources required to meet the goals and objectives.
5. Organizational roles, responsibilities, and coordination: The
development of roles and responsibilities in managing and overseeing
the implementation of the plan and the establishment of mechanisms
for multiple stakeholders to coordinate their efforts throughout
implementation and make necessary adjustments to the plan based
on performance.
6. Key external factors that could affect the achievement of goals: The
identification of key factors external to the organization and beyond its
control that could significantly affect the achievement of the long-term
goals contained in the plan. These external factors can include
economic, demographic, social, technological, or environmental
factors, as well as conditions that would affect the ability of the agency
to achieve the results desired.
We used the data collection instrument to determine whether each
characteristic was addressed, partially addressed, or not addressed. Two
GAO analysts independently assessed whether each element was
addressed, partially addressed, or not addressed, and recorded their
assessment and the basis for the assessment on the data collection
instrument. The final assessment reflected the analysts’ consensus and
was reviewed by a supervisor.
We also obtained available documentation and interviewed DOD officials
to determine DOD’s approach for monitoring the initiatives’ progress,
identifying accountable officials, and defining their roles and
responsibilities. We compared DOD’s efforts to our prior work on resultsoriented management and noted any differences.
We did not assess the reliability of any financial data associated with this
objective since we used such data for illustrative purposes to provide
context of DOD’s efforts and to make broad estimates about potential
costs savings from these efforts. We determined that these data did not
materially affect the nature of our findings.
To determine the extent to which DOD implemented its seven medical
governance initiatives approved in 2006, we first identified the
governance initiatives approved by the Deputy Secretary of Defense, and
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
then we visited locations where the initiatives were being implemented to
review available documentation related to the status of the efforts and
interviewed officials concerning any progress made. Specifically:
•
To determine the extent to which command and control structures in
the National Capital Region and San Antonio areas had been
established, we met with officials from the Joint Task Force National
Capital Region Medical and officials from the 59th Medical Wing,
Brook Army Medical Center, and the Army Medical Command in San
Antonio, Texas. We obtained and reviewed the charter establishing
the Joint Task Force and the memorandum of agreement establishing
the San Antonio Military Health System. Based on the interviews and
the reviews of the charter, memorandum of agreement, and other
documents provided by officials, we determined each organization’s
staffing, management structure, responsibilities and authorities, and
financing. We compared the resulting organization with the guidance
contained in the approved governance initiative to determine if the
organization complied with the intent of the approved governance
initiative. Furthermore, we interviewed officials and obtained any
information available to document and determine if any financial
savings had been generated from the change in governance
structure.
•
To determine the extent to which a command and control structure for
the Joint Medical Education and Training Campus had been
established, we met with officials from the Medical Education and
Training Campus. We obtained and reviewed the memorandum of
agreement establishing the Medical Education and Training Campus.
Based on this interview and the reviews of the memorandum of
agreement and other documents provided by officials, we determined
the organization’s staffing, management structure, responsibilities and
authorities, and financing. We compared the resulting organization
with the guidance contained in the approved governance initiative to
determine if the organization complied with the intent of the approved
governance initiative. Furthermore, we interviewed officials and
obtained any information available to document and determine if any
financial savings had been generated from the change in governance
structure.
•
To determine the extent to which the MHS’s and services’ medical
headquarters staff had been colocated, we interviewed officials from
Health Affairs, and we obtained briefings on the status of the
colocation as well as the latest Base Realignment and Closure
(BRAC) business plan developed for the colocation. Furthermore, we
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
obtained and examined the recommendation from the 2005 BRAC
Commission that mandated the colocation.
•
To determine the extent to which DOD consolidated all medical
research and development under the Army Medical Research and
Material Command, we interviewed Health Affairs officials responsible
for medical research and development funded by the Defense Health
Program appropriation to learn the extent to which these funds had
been consolidated under the Army Medical Research and Material
Command. We reviewed the interservice support agreement that
documents how Health Affairs and the Army Medical Research and
Material Command agreed to interact to manage the research funded
by the Defense Health Program appropriation. We reviewed DOD’s
2008 assessment of medical research and development investments
conducted for the Guidance for Development of the Force (fiscal
years 2010–2015) 1 for background on how DOD handled medical
research and development funds in the past and to document the
need for additional research and development funds.
•
To determine the extent to which DOD realigned the TRICARE
Management Activity to establish a Joint Military Health Services
Directorate and establish an agency to focus on health insurance plan
management, we interviewed Health Affairs officials to determine
what efforts had been made to accomplish these two initiatives and
examined the proposed Military Heath System Support Activity
organization put forth in the Defense Health Program’s fiscal year
2012 budget request.
•
To assess the extent to which DOD created governance structures
that consolidate command and control of the military treatment
facilities in locations with more than one DOD component providing
health care services, we interviewed officials at Health Affairs to
determine what efforts had been made and what future plans they
may have in this area.
To determine the extent to which DOD employed key management
practices while implementing the medical governance initiatives, we
1
Dr. Robert E. Foster, Captain C. Douglas Forcino, MSC, USN, and Dr. Frederick Pearce,
“Guidance for the Development of the Force FY2010–2015, Program and Budget
Assessment A4.16, Medical Research and Development Investments,” prepared for the
Under Secretary of Defense for Acquisitions, Technology and Logistics (June 2008).
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
compared DOD’s approach to implementing the approved governance
initiatives with key management practices that GAO has found to be at
the center of successful mergers, acquisitions, and transformations. 2
Although the GAO report on key practices for transformation listed nine
practices, we found that six of the nine had the most relevance to our
review. The six key practices we used in our analysis were
•
•
•
•
•
•
ensure top leadership drives the transformation,
establish a coherent mission and integrated strategic goals to guide
the transformation,
focus on a key set of principles and priorities at the outset of the
transformation,
set implementation goals and a timeline to build momentum and show
progress from day one,
dedicate an implementation team to manage the transformation
process, and
establish a communication strategy to create shared expectations and
report related progress.
We decided to exclude the following three practices: (1) the use of the
performance management system to define responsibility and assure
accountability for change, (2) the involvement of employees to obtain their
ideas and ownership for the transformation, and (3) the adaptation of
leading practices to build a world-class organization. Rather, we
assessed DOD’s use of each of the six of the practices because DOD
either employed a practice to some degree or the practice was
appropriate given DOD’s position in the transformational process.
However, this exception on our part does not suggest that DOD should
not employ these three practices in the future. As DOD progresses
through the change process, DOD should consider employing all of the
key practices to help ensure a successful transformation.
We determined the extent to which DOD employed the above key
management practices in implementing the medical governance initiatives
by comparing them to the actions taken by MHS officials. Specifically, we
reviewed the November 2006 action memorandum signed by the Deputy
Secretary of Defense that laid out the way ahead, provided some initial
guidance, and identified the seven next steps. We examined the 2008
Military Health System Strategic Plan, the Under Secretary of Defense for
2
GAO-03-669.
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GAO-12-224 Defense Health Care
Appendix I: Scope and Methodology
Personnel and Readiness Fiscal Year 2012-2016 Strategic Plan, MHS
stakeholders’ reports, the MHS Strategic Imperatives Scorecard, Defense
Health Program budget estimates, memorandums of agreement, an
interservice support agreement, charters, BRAC business plans, and
memorandums providing the status of implementations efforts. To
complete our understanding of DOD’s approach in implementing the
seven approved governance initiatives, we interviewed officials from the
Office of the Under Secretary of Defense for Personnel and Readiness,
Health Affairs, the TRICARE Management Activity, the Joint Task Force
National Capital Region Medical, the Medical Education and Training
Campus, Brook Army Medical Center, Army Medical Command, and Air
Force 59th Medical Wing. We compared this information to key
management practices for successful mergers, acquisitions, and
transformations and examined any differences.
Finally, we also interviewed officials who participated in the Office of the
Under Secretary of Defense for Personnel and Readiness’ review of
military health care and its impacts on the health of the force and the
Deputy Secretary of Defense’s review of MHS governance options. We
also obtained the final report from the Task Force on MHS Governance,
analyzed its methodology and findings, and discussed the results and its
recommendations with DOD officials.
We conducted this performance audit from March 2011 through February
2012 in accordance with generally accepted government auditing
standards. Those standards require that we plan and perform the audit to
obtain sufficient, appropriate evidence to provide a reasonable basis for
our findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objectives.
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GAO-12-224 Defense Health Care
Appendix II: Comments from the Department
of Defense
Appendix II: Comments from the Department
of Defense
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GAO-12-224 Defense Health Care
Appendix II: Comments from the Department
of Defense
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Appendix II: Comments from the Department
of Defense
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GAO-12-224 Defense Health Care
Appendix III: GAO Contact and Staff
Acknowledgments
Appendix III: GAO Contact and Staff
Acknowledgments
GAO Contact
Brenda S. Farrell, (202) 512-3604 or farrellb@gao.gov
Staff
Acknowledgments
In addition to the contact named above, Lori Atkinson, Assistant Director;
Rebecca Beale; Stacy Bennett; Grace Coleman; Elizabeth Curda; Kevin
Keith; Charles Perdue; Adam Smith; Amie Steele; and Michael Willems
made key contributions to this report.
(351588)
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